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Goodbye film hire agreements, hello brave new world!

As any cinema pundit, expert, or aficionado will be able to tell you (in fact almost any moviegoer will be able to tell you), this is an industry that changes rapidly. With a history that spans 100 years — from The Jazz Singer introducing sound, to color films, through to 3D film, home television, and home video — it seems there is little that the cinema industry can’t weather. New delivery formats and methods have enabled the industry to leverage content in fresh and exciting ways, but at the same time, there have been potential growth barriers such as the cost of digital cinema equipment. Piracy, ever-tightening release windows and other challenges mean cinemas must be constantly on their game.

Outside of the movies playing on screen, cinemas continue to explore and expand with new and exciting business opportunities. From soda and popcorn, cinemas have progressed to full restaurant offerings. The in-cinema experience has vastly improved from the uncomfortable fold up seats installed only 25 years ago to the grandeur of electronic recliners.

Conversely, agreements between cinemas (exhibitors) and the copyright holders for the films (distributors) have not matched industry progress. Used to share a significant percentage of their gross box office revenue with the distributor, film hire is by far the most important financial arrangement that an exhibitor has. With some exceptions and small refinements over the years, this arrangement has changed little since cinemas were single screen auditoriums with hundreds of seats screening 35mm film for long seasons.

As exhibition continues to evolve and cinemas face further pressure from competing entertainment channels and the demands of moviegoers, film hire is likely to see change. When a 35mm print was required for each cinema site and auditorium that would screen a film, there was sense in distributors making demands on exhibitors about screening that film. Commonly, sessions per day and week, season length, and screen sizes were relatively harshly prescribed by distributors. When distributor sales managers and exhibitor film programmers discuss scheduling at cinemas, they are thinking about the individual merits of a film and the tailoring of suitable agreements.

How do distributors and exhibitors get their money?

Distributors are best placed to time the national release of their films. They have access to release schedules and good knowledge of demographics and target audiences. Placement of product into the market is strategically driven based on a long list of analyses.

Exhibitors are in the best position to determine the films for their locations. They understand the demographics at each cinema site and understand the performance of films that have played successfully (or not) at each location. In essence, exhibitors are best placed to decide the times and the screens for their locations and the configurations that will attract a large house.

If an exhibitor expands the overall box office take that their cinema is generating (across a full year and across all films), then they will pay more in total film hire to the distributors.

None of these statements appear particularly contentious; if the nationwide box office was to increase significantly, distributors would be entitled to a higher amount of total film hire at the end of the year.

I’m not imagining a complete revision of the proportion of film hire that a cinema should pay, nor a world where the content owners receive less for their artistic work. But I do feel that the time is coming when the rather draconian contracts to obtain rights to screen a film are nearing an end.

What solutions enable cinemas to increase their total box office?

We should stop using the concept of a ‘print’. Whether it’s a print of a film, a booking slot, or a screen, the practice of booking one, two, or three ‘copies’ of a film for a cinema should be reviewed. If the best box office performance for a cinema suggests that a set of films should share screen space and times in a certain manner, then those are the sessions that should be screened. Many cinemas still show a film on a screen for a full week, as if it were a 35mm print, to fulfill distributors’ arbitrary screen number requirements.

Cinemas should be left to decide how many sessions of a film will be played, and for how long, instead of being obliged to comply with the distributor’s ‘session policies’. If a cinema can make more money by dropping underperforming sessions (even of very new films) and reconfiguring their schedule, they will increase their total box office and everyone wins!

If a film has completed its ‘useful life span’, but continues to play because of film hire agreements, it’s hurting all parties with vested interest. It makes sense to stop ‘end of weeks of play’ agreements. Instead, films playing to low admits could be replaced with alternate programming, where even a low uptake on an alternative film would be an overall win for the total box office.

If screens were open to more limited-appeal films, so that cinemas were not tied to long runs or onerous session policies, every cinema would have more programming opportunities. Even a cinema with a weak track record with a particular genre of film might consider releasing that genre, improving the offer at their cinema and attracting those extra customers. Distributors would find more scope for release of more edgy product, and moviegoers would have more choice at their local cinema.

All of these solutions present one very similar end result —they benefit everyone!

The exhibitors generate more box office revenue.

The distributors earn more film hire from that increased revenue.

The moviegoers enjoy better scheduling at the cinema as the exhibitor has greater flexibility to schedule films that suit them.

All it requires is a rethink from exhibitors and distributors, and a shift in focus away from film programming as a process that relates to a specific film. It should not be about the requirements for a film. Instead, it should be about driving higher box office returns for the whole industry.

Unfortunately, the nature of film distribution is that each film is tracked on its own. The marketing spend on a film and the return that it can make from the film hire that it generates is a key measure, both for the release of a film and for the sales manager responsible for releasing it.

It will take either an exhibitor with the industry influence and critical mass to force this through, or a distributor with the vision, the smarts, and the courage to see its value. Perhaps it even requires a nationwide agreement between distributors and exhibitors via an existing or new industry body to see this shift become reality. The hope must be that this new commercial arrangement can be revitalized cooperatively, before change is forced on the cinema industry due to the competitive pressures upon it.

That's our view. What do you think?

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About the Author: Phil Sneddon
Internal Training Consultant, Vista HQ

Phil has built his Vista knowledge through time spent as film booker, operations manager, cinema manager, usher, and ice cream roller (!) in the New Zealand cinema industry. During his time at Vista, he has applied his industry knowledge to support work with the services team, product management, and training. He still watches too many movies, but this makes him unbeatable in the movie round of pub quizzes.